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Teaser rates are short-term or introductory rates that are used to attract the attention of

consumers and generate new business for ongoing financial services. Generally, a teaser rate
is only in effect for a short period of time. After the duration of the teaser rate has expired,
this introductory rate is withdrawn and a more permanent and often higher rate goes into
effect.1

Some of the teaser rates are :-

• For non-maintenance of minimum balance in Savings Account – Rs 750 + taxes


• Prepayment of homeloans – 2% of the outstanding amount
• Charges for Demand Draft in rural areas where the amount is small – Rs. 50
• Depositing Cash in the branch other than the base branch – Rs 100
• Issuing duplicate bank statements – Rs 100
• Cash withdrawal from other banks’ ATM beyond 5 transactions – Rs 20 (which was
reduced from Rs 55)

The teaser loans are loans in which the interest rates are fixed for the first two years and the
rates are changed according to the market rates in the next years. The present rate is 8-8.55
and this is fixed only for the first year. The rates may be increased and they are changed into
the floating ones. These loans are provided by the SBI, HDFC and ICICI.

The problem of the RBI is that the banks are cheating people without telling the truth even
the people are benefiting from these loans. The restriction of the RBI banks is that they are
not checking whether the loan takers are capable of paying it or not after increasing the rates.
So when they are not capable of paying the loan, the debts are increased for the bank. If we
take the loan for 20 lakhs at 8% interest, then we should pay Rs.16,729 per month. If
the interest rate is increased to 12%, then we should pay Rs.22,000 as EMI. The banks are not
telling that the interest rates will be increased and they are not checking whether the loan
taker is capable of paying it or not. This is problem for the government and RBI and the
banks are not telling about the increase in the interest rates due to changes in base rates in
July.

Details SBI-8% LIC HDFC fixed cum Floating rate


floating
1
“Teaser Rates”, http://www.wisegeek.com/,<http://www.wisegeek.com/what-is-a-
teaser-rate.htm>
Loan amount 20 0 20
Interest to be paid 18.12 18.22 18.68
Interest + amount 38.12 38.22 38.68
Interest rate 9.56 9.65 10.47

Offers:

Bank 1st year 2nd year Next years


SBI 8% 9% Floating rate
HDFC bank 8.25 9% Float rate
ICICI bank 8.25 9% Float rate

SBI launched the teaser home loan scheme in February 2009 when the country was fighting
the trickle-down effect of the global financial crisis.

The scheme, which was initially launched for a few months, became hugely popular and as a
result SBI went on to extend the scheme.

From SBI’s point of view, the loan product was introduced to boost demand during the
downturn. However, RBI feels floating rate loans for a very long tenure pose a risk because it
is not possible to predict interest for a very long period.3

2
“Teaser Loans”, http://www.ithappensinindia.com,<
http://www.ithappensinindia.com/what-are-teaser-loans-and-its-uses-things-to-
be-done-before-taking-teaser-loans/>

3
“banks ask rbi to define teaser loans”, www.business-standard.com ,<
http://www.business-standard.com/india/news/banks-ask-rbi-to-define-teaser-
loans/416430/>
Bibliography
http://www.wisegeek.com/what-is-a-teaser-rate.htm

http://www.ithappensinindia.com/what-are-teaser-loans-and-its-uses-things-to-
be-done-before-taking-teaser-loans/

http://www.business-standard.com/india/news/banks-ask-rbi-to-define-teaser-
loans/416430/